Monthly Archives: December 2014

Technical Read: The drop in gold today restored short-term the risk/reward reading to an acceptable level. GLD is finding support at the 112-112.5 level (12/01 and 12/22) and unlike the 114 support level, the nonlinear trading analysis indicates 112 should hold. The holiday truncated trading week should help the bulls too. Gold trading signal: We have a buy. This signal is mostly generated as a result of technical models.

Backdrop:

Catalyst 1 – The US dollar index has paused from its recent bullish move. The trend is still up but the greenback may hover here for a while, meaning a limited headwind for gold. If the dollar falls back, it will be a bullish for the yellow metal.

Catalyst 2 – The S&P 500 continues to inch its way up but after 8 positive days (I am fudging on the 24th) a pause is warranted here as well. Since a down day is due, this is a mild positive for gold.

May the Mummy watchers enjoy the New Year’s Day festivities, but I would also invite you to take time and ponder the new year: the doors that will be opened, the doors that will be closed and the “brief authority” in which we all operate.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info. Currently available.

Currency Trading Signals. I will be offering a similar process for currencies (the US Dollar, plus one more) after Jan 31.

Technical Read: GLD fell near to the bottom end of the range (approx. 112-117.3, GLD basis) then bounced from the low energetically on Friday. This isn’t bad action for the bulls (nonlinear trading analysis generally supports this), unfortunately Friday’s 2 pt bounce was sufficient to make the market overbought in the current range bound environment. We will have to see what happens next week. Gold trading signals: No signal.

Backdrop:

Catalyst 1 – The US dollar index is still in good shape. Both this and US equities are benefiting from the recent revision in the 3Q GDP up to 5%. This is a very salubrious number from the US and will attract assets from all over the world. Dollar action is bearish for the yellow metal.

Catalyst 2 – The S&P 500 is hugging the top end of its recent trading range. Equity bears are looking for technical selling. The bulls are powered by more fundamental factors. The edge is on higher prices here. This is mildly bearish for the gold trading.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info. Currently available.

Currency Trading Signals. I will be offering a similar process for currencies (the US Dollar, plus one more) after Jan 31.

Technical Read: I posted last time that the GLD 114 nascent support level (partially established Dec 5th and 16th) was not confirmed by nonlinear trading analysis. Today’s drop through the level confirms this opinion. We are still in the range (approx. 112-117.3, GLD basis) but rapidly approaching the low end. The next support level is 112, I think this is more likely to hold than 114, however a buy signal has not been generated yet. No signal.

Backdrop:

Catalyst 1 – The UD dollar index has moved north and taken out the monthly highs. Dollar action is bearish for the yellow metal.

Catalyst 2 – The S&P 500 is not retreating from the near-term resistance (approx. 2080). Traders should be wary that a breakout is likely. A move higher would be bearish for the yellow metal.

Ponderable – May the mummy watchers have a considerable amount of Christmas cheer on the 25th!

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

Technical Read: The last 3 trading days have seen considerable intraday swings but not a lot of directional motion. We are still in the trading range (approx. 112-117.3, GLD basis). Is the 114 level going to hold? The market held on the 5th and 16th, but the last rebound is not convincing. Nonlinear trading analysis is not suggesting it will stabilize here. No signal.

Backdrop:

Catalyst 1 – The dollar rallied strongly on Wednesday and had a more muted follow-through today. The Russian ruble crisis is grabbing most of the headlines in this asset class (CNBC was quoting the ruble/dollar on its short-list currency screen). Dollar up is bearish for the yellow metal.

Catalyst 2 – The S&P 500 rocketed up over the last two days, putting it near resistance. The “Chiller” network carries the tag line “Scary Good” and to some extent the line has applied to the plunge in crude. The discount in energy prices (simulating a massive tax cut) is the “good.” But there has been concerns that a massive re-pricing of such a major asset class might result in a major financial institution getting caught on the wrong side and failing (ala Long Term Capital Management), hence the “scary” part. Jane Yellen’s comments labeling the plunge a net positive event has helped relieve the stress. The equity rally is a negative for gold.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

Technical Read: On Dec 15th gold fell back in the trading range (approx. 112-117.3, GLD basis). The 16th featured considerable intra-day volatility. Trading over the last couple of days and Dec 8th suggest that the 114 level may be the rallying point of a local bottom, however recent technical work does not confirm this yet. No signal.

Backdrop:

Catalyst 1 – The currency world was rocked today when the Central Bank of Russia hiked rates a stunning 650 basis points today. The increase came without warning and puts the county’s interest rate at 17%.The move is seen as an act of desperation to prop up the ruble. Russia’s currency is under considerable pressure during the plunge in crude (Western sanctions are a lessor factor). The US dollar fell in the aftermath and this is bullish for gold.

Catalyst 2 – The S&P 500 broke south of near-term support (approx. 2040). Big cap equities have been under the cloud of a looming deflationary storm. Uncertainty out of Russia is not improving things either. Anything resembling panic selling is going to be positive for gold on a short-term basis (longer-term deflation is not a positive for many asset classes).

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Technical Read: On Dec 9th gold popped, breaking above the recent trading range (approx. 112-117.3, GLD basis). My technical indicators had not registered that the market had enough energy to do this in a sustained way. The following 2 days the market drifted back. So the situation is the yellow metal is just above the recent range but technical work is not confirming the breakout. No signal.

Backdrop:

Catalyst 1 – The US dollar trend is generally up, though we have seen selling in recent days. The market mood is supportive for the greenback. This is bearish for gold.

Catalyst 2 – The S&P 500 had really unusual action this week. After making a new high, the market sold off the 8th then attempted to drop off the next day but buyers came to the rescue before the close. The next two trading sessions (10th and 11th) featured significant intra-day selling. The index is currently resting on support (approx. 2030). If this does not hold, lower S&P prices will be supportive for gold.

Catalyst 3 – Crude oil dropped below $60 today. Previously, pundits had signaled a floor near $70. If you look at a 5-year chart, you cannot help but be struck by the fact that all support has been violated and that the recent move has a parabolic theme to it. This energy cost reduction is going to act as a tax-cut for almost everyone and provide a stimulus effect, possibly giving cover for the Fed to end QA. But looking at the 5-year chart, you may feel a drop in temperature, like when a summer storm rolls in suddenly and drops the mercury. Does this mean deflation is on its way?

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Technical Read: Gold is going back and forth inside the range (approx. 112 to 117, GLD basis). The present technical read does not indicate enough energy (preponderance of sellers or buyers) to bust out the channel. So, we are back to the waiting game.

Backdrop:

Catalyst 1 – The US dollar has broken out of its recent trading range. The currency back drop of US economic out performance is a key factor. The National Association for Business Economics posted an upbeat forecast for US GDP in 2015: 3.1%. Estimates for Europe and Japan are closer to 1%. This is bearish for gold.

Catalyst 2 – The S&P 500 dropped off today. Overall, the trend is still up and this week featured new highs. This is mildly negative for Gold.

Catalyst 3 – Two pro-democracy hunger strikers in Hong Kong withdrew. At least one cited health reasons behind the capitulation. The protests began in earnest over two months ago. Short-term the movement may be waning, but Is there a longer-term cycle at work here? Is the groundwork laid for future pro-democracy gains in Hong Kong and China?

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

Technical Read: Gold looks to be forming a new trading range based on the recent high/low established over the last 4 trading days. Using the GLD ETF as a proxy, the range would be 117 to 112 (approx.) Today’s closing price of 116.33 puts the indicator near the high end of the range. Can it push further north now? Technically, probably not.

Backdrop:

Catalyst 1 – The US dollar is breaking out of its trading range. Global growth problems in Japan and Europe are looming factors. A resumption of the dollar uptrend is negative for gold. With gold near-term overbought, this should argue against gold going much higher.

Catalyst 2 – The S&P 500 rallied the last two trading session. This makes it seem like big-cap equities are not ready to roll-over yet. Mildly negative for Gold.

Catalyst 3 –The world watches as crude prices plunge lower, below the psychologically important $70 level. Expectations are for US output to increase during 2015. Can OPEC rally to put the breaks on the slide? Sunni/Shite relations are not high. This is negative for commodities in general, and gold as well.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

Technical Read: Gold was slammed during holiday thinned (a new phrase) trading on Friday but the bears’ dominance was decisively crushed with a substantial rally today. GLD is above our entry level (11/20) but now short-term overbought. Readings indicate it is time to go neutral (exit longs).

Backdrop:

Catalyst 1 – Friday’s gold crash did not manage to coincide with a dollar breakout (this was a clue to the “brief” aspect of the selloff). The US Dollar index is still in its trading range, so a positive for gold

Catalyst 2 – The S&P 500 had a downside reversal today as well. The uptrend is still in effect but the strength is starting to wane. Mildly positive for Gold.

Catalyst 3 – Moody’s (credit rating agency) cut Japan’s credit rating from AA3 to A1. US credit rating agencies don’t really have the reputation for great forward insight. Still, taken for what it is, another asset class on the ropes, mildly positive for gold.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.